escalating international incident, set off by the arrest of an indian diplomat here in new york, charged with mistreating her household worker. Abc's linzie janis with the latest. Reporter: This indian diplomat is accused of not paying her house help here in the u.S., A legal wage. But her claims of handcuffs and strip searches have turned her arrest into a diplomatic crisis. This is the woman sparking a firestorm this morning between the united states and one of its staunchest allies. The indian government is calling the u.S. Barbaric. An indian diplomat in the u.S. Has been charged with visa fraud and making false statements over allegedly under waying an indian housekeeper. We're looking into the intake procedures surrounding this arrest, to ensure that all standard procedures were followed. Friends don't treat friends this way. Reporter:39-year-old devyani khobragade. Alleging he paid a nanny $4,000 a month. But in reality, paid her $3 an hour, below minimum wage. When your boss lives with you, these situations tend to happen. Reporter: Khobragade has pleaded not guilty, claiming she has diplomatic immunity. The diplomat said she was arrested in front of her daughter's school. Then, subjected to repeated handcuffing and strip searches before being thrown in jail with common criminals. But the u.S. State department insists proper procedure was followed, adding that as a consulate employee, she does not have full diplomatic immunity. But the indian government is outraged. And retaliating. Indian officials now asking for visa, salary and bank details of all teachers at u.S. Schools in india. New delhi police have taken away barricades outside the u.S. Embassy. And u.S. Consulate personnel in india have been asked to turn over the very i.D. Cards that grant them diplomatic immunity. There wasn't a reason on earth to have treated her this way. For that matter, there wasn't a reason on earth to have charged her with a crime. Reporter: Also overnight, the manhattan u.S. Attorney, disputing khobragade's claims. Acknowledging while she was fully searched as standard practice, the agents arrested her in the most discreet way possible. Adding that unlike most defendants, she was not handcuffed or restrained. Khobragade is due back in court JANUARY 13th. If convicted, she faces up to 15 years in prison. In the meantime, u.S./India relations, deteriorating rapidly. Thanks very much.

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